Cook County Eyes $4 Phone Tax

Cook County Eyes $4 Phone Tax
December 1, 2007

Steven Titch

Steven Titch is a policy analyst focusing on telecommunications, Internet and information... (read full bio)

A Cook County, Illinois proposal to impose a $4 tax on all wireline and wireless phone lines has drawn fire from all sides, including the local phone company, consumer advocates, and the local utilities watchdog group.

The Cook County Commission floated the idea in mid-October and immediately faced a backlash from the Illinois Chamber of Commerce, the area's Citizens Utility Board (CUB), Chicago's Ministerial Alliance Against the Digital Divide, and AT&T, marking a rare occasion where representatives of consumer, business, and industry interests find common ground.

Cook County, in northeastern Illinois, takes in the city of Chicago and its inner ring of suburbs including Evanston, Wilmette, and Oak Park.



Will Harm Poor, Minorities

Counting conventional landline phones, cell phones, faxes, and Internet connections, both AT&T and CUB separately estimate the average Cook County consumer has five phone lines. That would add up to $20 a month--or $240 a year--in extra taxes if the plan goes through. In addition, the proposed tax would be indexed to inflation. Over the course of five years, it could cost average households as much as $1,200, according to NoPhoneTax.org, which cites more than 80 groups opposing the tax.

"That CUB and AT&T agree ought to tell the county commission what a terrible idea this is," said Steve Stanek, a research fellow specializing in tax and budget issues at The Heartland Institute. "This sounds like a terrible proposal for a lot of reasons, starting with the fact it is such a regressive form of taxation on hundreds of thousands of low-income people who live in Cook County."

David Kolata, executive director of CUB, did not respond to phone calls by press time, but a statement by CUB opposing the tax said it would negate the savings from a series of low-cost calling plans CUB negotiated last year to help seniors, low-income consumers, and others afford basic telephone service.

The new tax comes just as broadband service is beginning to make gains among minorities. In 2005 only 14 percent of African-Americans had a high-speed Internet connection, according to the Pew Internet and American Life Project. By July 2007 that rate had jumped to 40 percent. Raising the taxes would make broadband much less affordable and slow progress in closing the digital divide.



Burden Already High

The new Cook County tax would be heaped on top of the abnormally heavy burden of excise taxes and surcharges the state and city already collect.

In a May 2007 study of telecom tax rates by the Chicago-based Heartland Institute, Chicago ranked fifth among 59 U.S. cities in landline tax rate paid by average consumers--27.78 percent--and second in wireless tax rate--18.49 percent. The proposed $4 increase would push Chicago consumers to the top of the list, with the rest of the county's residents not far behind.

William Beavers, the county commissioner sponsoring the new tax, told the Chicago Tribune the county does not get any money from phone taxes the state and city assess. The $4 tax is intended to reduce the county's projected 2008 budget deficit of $307 million, he said.

In addition to hurting poor consumers, the tax would drive small businesses--and the jobs they create--into neighboring counties, Stanek notes. "Lake, Kane, and DuPage counties would love to have Cook County do this," he said. "Chicago and Cook County in recent years seem to be on a path to drive business out. If the tax passes, some business will move across county lines or into Indiana."

The tax may be unconstitutional. The 1970 Illinois constitution prohibits home-rule bodies, including Cook County, from imposing taxes on services without approval by the General Assembly. Illinois courts in the past have cited the provision when quashing attempts by Illinois cities to impose taxes independent of the state legislature.


Steven Titch (titch@heartland.org) is The Heartland Institute's senior fellow for telecom and information technology and managing editor of IT&T News.

Steven Titch

Steven Titch is a policy analyst focusing on telecommunications, Internet and information... (read full bio)